For part 2 of this blog series, we’ll be going over some additional documents that you’ll need to get before the loan process begins. Some of these documents are needed only if they apply to you, as well. We’d recommend still getting these before getting pre- approved in the mortgage process.
- 1 Minute | No Hard Credit Check
Tax Returns For The Last 2 Years
In order to save time, we recommend getting all pages of your two most recent tax returns. The underwriter reviews these documents to make sure that taxes aren’t owed, there isn’t any additional income that has not been reported, and to cross reference dependents for some loan programs. If you do owe taxes, the underwriter may require proof that this new debt has been paid, which can be done with a verification letter from the IRS. The income reported here will need to match the income on all of your….
W-2 and 1099 Forms
The underwriter will request all of the W-2 forms for all employers of the last 2 years. This gives the underwriter an idea on your true income and will compare it to your tax returns for these years as well. If these numbers come up different, the underwriter may ask for any additional W-2 forms that may have not been sent in.
For 1099 Forms, it’s very similar to W-2 forms. If you’ve been 1099 for all of the most recent 2 years, then you just need to submit all 1099 forms that are applicable. Once again, the underwriter will cross reference the income here and the income on your tax returns to make sure that everything matches up.
Profit and Loss Statements And Balance Sheets
If you own your own business, you will need to provide Profit and Loss Statements and Balance Sheets. The Profit and Loss statements are also known as income statements. The underwriter looks at the profit and loss statement for a home buyer to see the “economic feasibility” of a company. This includes information about a company’s ability to generate income, as well as giving the underwriter an idea of the expenditures of a company. If a profit and loss statement for 2018 is asked for, for example, that information needs to match the information on a Tax Return for that same year.
A Balance Sheet is a little bit different, but is still required. The Balance sheet is a current year-to-date summary or snapshot of a company’s current financial capabilities. If a borrower’s company does not have investors, there is a possibility that the underwriter may not require the Balance sheet, and only require the Profit and Loss statements. However, the profit and loss statements MUST match the supplied tax returns, or there will need to be more information needed.
Bankruptcy Documents
If you’ve had a bankruptcy more than 2 years ago, you’ll need to provide these documents to a mortgage lender. A good rule of advice for most loan programs is to wait 2 years after the bankruptcy’s discharge to apply for a home loan. Depending on how much your credit health has improved since then, the lender may be willing to still approve a decent mortgage rate as well.
If you’ve had a Chapter 7, the lender just requires your bankruptcy order and the discharge of debtor documents to ensure that you are no longer required to pay off your specific previous debts. If you’ve had a Chapter 13 Bankruptcy, the lender will most likely need all of your bankruptcy paperwork listed for Chapter 7 plus the following: Payment history and a Judge/Trustee approval for a new loan.
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Divorce and Child Support Documents
If you’ve filed for divorce, the underwriter will need a copy of your full divorce decree. The divorce decree will show all terms of the divorce, including how much alimony and child support is to be paid, if any.
If there is child support on the divorce decree, depending on if you receive or have to pay it determines what additional items you need. If you pay child support, you will need the full child support order.
If you receive child support, you can use that to support your monthly income calculation for the loan. In this case, you’ll need the child support order and proof of receipt of payment for the last 12 months. Also, if the divorce decree isn’t clear, you’ll need a birth certificate to verify how much longer the child support will be received.
